THE North-East region of the Institute of Directors (IoD) is expecting the Bank of England's monetary policy committee to hold interest rates at four per cent when it meets today.

It said there were undoubtedly signs that parts of the economy were falling back, not least from its latest Business Opinion Survey, after some improvements in the second quarter.

Consumer spending seemed to be slowing and manufacturing industry had effectively been in recession since the beginning of last year.

The heavy falls in the stockmarkets were also undermining business confidence. However, the housing market remained remarkably buoyant.

Peter Allan, the IoD's North-East region chairman, said: "We do not expect the Bank of England to alter interest rates this month, even though the bias now is clearly towards easing.

"We have been concerned for some time that a strong economic recovery has not been established and our latest Business Opinion Survey showed few signs of a pick-up in the business sector of the economy.

"Consumer spending seems to be easing and the manufacturing sector continues to haemorrhage jobs.

"Moreover, the inflationary situation is very benign. All these things point to a cut in the near future.

"But, given the renewed buoyancy in the housing market, we believe the Bank of England will keep rates unchanged this month. If they do cut, we would be pleasantly surprised."